SANTA CLARA, Calif.--To an unenlightened observer, Ron Haidenger's demonstration of playing a video game by tilting a piece of cardboard back and forth looks more than a little bit nutty.

But to anyone wearing his company's computer-enhanced glasses, which seamlessly delete the image of the cardboard and replace it with a metal ball spinning through a gleaming three-dimensional maze, it's a near-hypnotic experience.

"The response no matter where we show it is phenomenal," says Haidenger, manager of Vuzix's consumer division. "There's a huge hunger in the market for AR hardware."

AR is, of course, short for "augmented reality." The concept isn't entirely new: it's crept into public consciousness in the last few years in the form of those virtual yellow line markers in broadcasts of football games and heads-up displays in some cars.

But a new crop of entrepreneurs and venture capitalists has more ambitious plans. They gathered here this week in the Santa Clara Convention Center for a conference that's not called one--the official title is the first Augmented Reality Event--to come up with concepts that will convince all but the most technophobic that they should be looking at the world through a new set of spectacles.

Haidenger's company, Vuzix, is already shipping the Wrap 920 ($350), which looks a lot like sunglasses tethered by a black umbilical cord. The next model, the 920AR ($999), will feature 3D support and is expected ship by mid-July.

Not only does the Rochester, N.Y.-based company want to allow tracking how the user's head rotates (the three axes are yaw, pitch, and roll), but the next step is to track if the body itself moves up or down, left or right, and forward or back. "We're just about to release a new version (of our software) that adds support for six degrees of freedom," Haidenger says.

While that kind of sensitivity provides a truly immersive environment, glasses remain relatively expensive, make you look a bit like a cyborg, and require you to be leashed to a computer. That's prompted other AR-trepreneurs to turn their attention to more humble ends: namely, altering the video streaming from an iPhone or laptop's built-in cameras.

A company called Total Immersion adds an AR experience to just about any webcam-equipped laptop by allowing real-world objects like a soda can or magazine cover to be digitally enhanced on screen. (If that sounds less than thrilling, check out the remarkable videos on t-immersion.com.)

One implication: Movie marketing can be taken beyond tie-ins with Mattel toys. In a deal with Total Immersion, robots from the Transformers movie can be manipulated on a computer screen by holding up the movie's DVD or Blu-ray packaging in front of the camera.

Children's games are an even more natural application. Chas Mastin of Whistlebox.com demonstrated a webcam-enabled game in which a set of brightly colored characters that appear to be beavers (or neon platypuses) ask a child to join in activities like waving his or her hands to fling a mud pie across the river.

"What we're doing this summer is building a prototype," Mastin said, comparing his start-up's work to "a new form of art for the 21st century." (In a nod to parents concerned about lethargic offspring, he helpfully noted that "getting kids active in front of computers is better than having them go 'click, click, click.'")

Elevating dancing beavers to this century's art form may be hyperbole, but it's a sentiment that's commonplace among the technologists who are trying to create a quiet revolution in the way humans interact with computers. Among the frequently expressed sentiments at this week's conferences: AR is "a magical place," that will "transcend venue and platform," and "it becomes your reality."

Another question: Who will build the first AR equivalent of Farmville, Zynga's inexplicably addictive game that has become wildly popular.

One of the contenders is San Francisco start-up E23 Games, which started distributing an iPhone app this week that allows users to "tag"--yes, that means scrawling virtual graffiti--on physical locations. The more popular the graffiti-art as rated by the app's users, the longer it stays virtually extant.

But Joe Dunn, E23 Games' chief executive, has bigger plans. If Farmville worked so well, he suggests, what about virtual AR pets? "In another game that we might create, we might see Jim's dragon, which you need to feed" by spending money, he says.

And, of course, there are what marketers might call potential branding opportunities and additional revenue streams. "If your dragon is hungry, you might look around for a place to feed it," Dunn says. "Like a Domino's Pizza."

About the author

Declan McCullagh is the chief political correspondent for CNET. You can e-mail him or follow him on Twitter as declanm. Declan previously was a reporter for Time and the Washington bureau chief for Wired and wrote the Taking Liberties section and Other People's Money column for CBS News' Web site.
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